Top ten stocks which are likely to benefit from Modi’s Smart City mission

Prime Minister Narendra Modi-led government plans to spend over Rs 3 lakh crore over the next 5-6 years to recast urban cities.NEW DELHI: The government, which has called for ‘Housing for all’ by 2022, took a step further in that direction on Thursday by announcing the list of ninety eight smart cities that the government has shortlisted.

Uttar Pradesh has bagged the maximum number of smart city projects at 13, Tamil Nadu has got 12 and Maharashtra 10. Madhya Pradesh will have seven smart cities and Gujarat and Karnataka will have six each, Minister of Urban Development Venkaiah Naidu announced here today.

Prime Minister Narendra Modi-led government plans to spend over Rs 3 lakh crore over the next 5-6 years to recast urban cities. Of the 98 smart cities, 24 are business and industry centres, 18 are cultural and tourist centres and 3 are education and health care hubs, Naidu said.

The development of smart cities is a welcome move by the government and is the need of the hour. India is witnessing strong growth in urban population, which is projected to rise steadily over the next 2-3 decades, say analysts.

“With the pressure already immense on infrastructure and services available in existing cities, smart cities will not only help curtail the steady influx of rural population into the existing urban cities, but also provide an alternative solution for growth to the increasing urban population in the country,” says Hitesh Agrawal, Head, Research-Reliance Securities.

The benefit of development of smart cities will not just be visible in the form of a relatively richer, stress-free and hygienic lifestyle for citizens, but this will also provide a boost to the Indian economy.

He is of the view that this in turn will lead to considerable demand creation across sectors like metals, cement, paints, electric goods (fans, lighting, etc.), wires & cables, pipes, furniture & fittings, sanitaryware, ceramics, etc.

Apart from that, infrastructure and housing finance companies will also benefit from this opportunity. Technology solutions will also play an important role in the seamless functioning of smart cities.

According to experts, besides improving the economic climate and the GDP, the smart cities mission would also attract the investment from overseas."This initiative by the government is likely to help the construction sector, the real estate industry, infrastructure sector, steel sector and cement sector. Even the consumer durable sector, which generally benefits from construction activities, is also going to get the much-needed boost," said D K Aggarwal, CMD, SMC Investments and Advisors Ltd.

We have collated a list of ten stocks from various experts that are likely to benefit from the PM’s Smart City mission:

NBCC is a public sector company and is engaged in project management consultancy, civil infrastructure for power sector and real estate development, under the Ministry of Urban Development.Implementation of smart city will definitely boost the business of the company because already it is doing infrastructure development under the Jawaharlal Nehru Urban Renewal Mission (JNURM). So, past experience will definitely benefit the company and it may do participate in both, infrastructure development as well as smart city implementation.

Schneider Electric is the global specialist in energy management and automation. It develops technologies and solutions to make energy safe, reliable, efficient, productive and green. The company also invests in R&D in order to sustain innovation and differentiation, and have a strong commitment to sustainable development.The 100 smart cities project and the digitization plan will play a crucial role in transforming. The company is pushing for orders on technological side and focusing on new segment such as data-centers, water segment, railways and food & beverages. Moreover, smart cities initiatives may give the company good orders, which will help it grow fundamentally.

Sterlite Technologies Ltd:

Sterlite Technologies, a leading global provider of transmission solutions for the telecom and power industries, will definitely get benefit from the Centre's initiatives, because recently the company has signed an agreement with Ericsson to work together in driving smart sustainable city initiatives. Moreover, Sterlite is pioneering Fiber-to-the-Home (FTTH) deployment in the country to enable high-speed broadband connectivity. Sterlite Technologies is developing several transmission infrastructure projects spanning over 5000 circuit kilometres across India.

Kalpataru Power Transmission is engaged in power transmission & distribution, oil & gas pipeline, railways, infrastructure development, civil contracting and warehousing & logistics business with a strong international presence in power transmission & distribution. The company is currently executing several contracts in India, Africa, the Middle East, Australia, CIS, SAARC, North America and Far East. The company already has an order of infrastructure from the railways, transmission order from Power Grid, and the management is very prospective to participate to get the infrastructure segment order. With the past goodwill, the company is expected to get the benefit from the smart city project.

KEC International Limited is India's second-largest manufacturer of electric power transmission towers and one of the largest power transmission engineering, procurement & construction (EPC) companies in the world.The company currently is into power transmission & distribution, railway infrastructure, water management, cables manufacturing, and solar. The company has manufacturing facilities in Nagpur, Jabalpur, Jaipur (Tower and Steel Structural), Vadodara, Mysore and Silvassa (Cables).The company having the past experience of various global transmission line contracts like Kenya, Afghanistan, Brazil etc. would help to get order related to transmission in forthcoming smart cities’ project and directly impact the financials of the company.

VA Tech Wabag:

It is a leading multinational company specialized in water and waste water management with strong order book and global presence. The company is actively participating in the Govt’s National Rural Drinking Water programme for providing safe drinking water, which will help get the orders related to the smart cities project.The Chennai-based company already provides 25% of Chennai population desalinated water for drinking and targets to reach at least 50% soon. South-based smart city project order related to providing drinking order will definitely provide the benefit to the company.

Analyst: Hitesh Agrawal, Head, Research - Reliance Securities

Asian Paints:

Being a leader with over 50% market share, Asian Paints is likely to benefit from the incremental demand that will be generated by the housing sector in the wake of the 'Smart City' and 'Housing for All' projects by the government. Moreover, the company has started concentrating on becoming a complete home solutions provider going by its recent acquisitions.

Cera Sanitaryware: Cera's major strength lies in its strong brand image and vast distribution network. It has 1,400 distributors and 14,000 retailers and has 23% market share in sanitaryware market. In recent years, the company has added new business verticals, which include faucetware and tiles. We believe the government's thrust on smart cities, housing and sanitation will create incremental demand for the company's products.

LIC Housing Finance: Housing finance companies like LIC Housing Finance are in a sweet spot due to the growth opportunities available in the country along with improving funding environment. This, along with the government's focus on its mega flagship schemes, clearly indicates good times for HFCs.

Bajaj Electricals:The company is well-diversified across various business segments, which include appliances, fans, lighting, luminaires, and EPC, amongst others, with a robust nation-wide distribution network and a strong brand. The infrastructure and housing booms triggered by the government's flagship schemes will entail robust demand for the company's products.

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